2025 (5) TMI 173 - HC - Customs

Detention of consignment of perishable goods Mistake in filing of Import General Manifest (IGM) by the Shipping Company - Restraint on movement of goods from Sea Port of Mundra to ICD Ludhiana - seeking permission for filling of Manual Bill of Entry at the port of ICD Ludhiana for clearance of goods which are highly perishable in nature - HELD THAT - From the perusal of the facts which have come on record and the orders passed by this Court from time to time we are satisfied that the respondent-Custom Department had wrongfully and illegally withheld the perishable food item i.e. Kiwi which has limited shelf life. It is noticed that in import cases of perishable goods there is an inherent urgency which needs to be noticed and considered by the concerned stakeholders. In the facts of the present case there has been huge delay in compliance of the procedure. While initially the respondents did not issue the necessary orders it is only with the direction of this Court that the respondents permitted the amendment of Import General Manifest (IGM) from Mundra port to GRFL ICD Sahnewal Ludhiana. It is only when the Court found that its orders were not being complied with and action amounted to committing contempt of Court that the goods were transhipped to Ludhiana. The respondents did not release the goods even thereafter and again raised a doubt with regard to the place of origin of import of Kiwi fruit inspite of there being documents issued by the UAE Custom evidencing the origin of the goods as Chile. Upon joint inspection conducted in terms of orders passed by this Court on 24.07.2023 25% of the goods were only examined which reflected 25% of the said goods have been completely damaged. The interpretation of Section 26A (3) of the Act cannot be held to mean the denial of a refund claim even where the goods have perished and the shelf life has ended after the goods have already touched the store - The same reflects the attitude adopted by the Custom Authorities that they were not ready to release the goods. The shipping company also did not cooperate in spite of directions by this Court and an attitude of insensitivity to the goods being perishable was adopted. Hon ble Supreme Court recently in Zulfiquar Haider vs The State of Uttar Pradesh 2025 (4) TMI 1527 - SUPREME COURT has awarded compensation to the victims whose houses were wrongfully demolished. The Courts in cases where there is deliberate and willful action of the State or its functionaries in depriving any person ought not shy away from granting compensation. Keeping in view that in spite of several orders passed by this Court for release of perishable fruit Kiwi the respondents did not act promptly and the entire consignment of imported goods got perished. Conclusion - i) The Import General Manifest filed by the shipping company was incorrect in declaring Mundra as the final place of delivery; the Customs authorities were empowered and obligated to amend the IGM to reflect ICD GRFL Ludhiana as per Section 30(3) of the Customs Act. ii) The petitionerias entitled to refund of the import duty paid with interest despite Section 26A(3) excluding refund for perishable goods as the loss was caused by official delay and non-compliance with Court orders. iii) The petitioner is entitled to compensation for the loss suffered due to negligence and wrongful detention by the respondents fixed at Rs. 50 lakhs recoverable from responsible officers. The respondents are directed to release the amount paid as custom duty on the Kiwi for import into India along with interest @ 6% per annum - petition allowed.

Summary

The core legal questions considered by the Court in this matter include:

1. Whether the Import General Manifest (IGM) filed by the shipping company at the port of Mundra, incorrectly declaring the final place of delivery of perishable goods as Mundra instead of ICD GRFL Ludhiana, could be amended under Section 30(3) of the Customs Act, 1962, and whether the Customs authorities erred in refusing to permit such amendment.

2. Whether the petitioner was entitled to file a manual Bill of Entry under Section 46 of the Customs Act for clearance of highly perishable goods at ICD Ludhiana, despite the online IGM filed at Mundra indicating Mundra as the final delivery point.

3. Whether the delay and failure by the Customs authorities and shipping company in amending the IGM and permitting clearance and movement of goods caused wrongful detention and damage to the perishable goods, thereby entitling the petitioner to compensation and refund of customs duty.

4. The legal implications of wrongful detention or seizure of imported goods by Customs authorities, including the principles governing seizure and the State's liability for loss or damage to goods in its custody.

5. The applicability and interpretation of Section 26A of the Customs Act relating to refund of import duty on defective or damaged goods, especially concerning perishable goods that have exceeded their shelf life due to delay caused by the authorities.

6. The extent of the Court's power to award compensation in writ jurisdiction under Article 226 of the Constitution for loss caused by wrongful administrative action.

Issue-wise Detailed Analysis:

Issue 1: Amendment of Import General Manifest (IGM) under Section 30(3) of the Customs Act

The Customs Act, 1962, under Section 30(3), empowers the proper officer to permit amendment or supplementation of the Import General Manifest if it is found to be incorrect or incomplete, provided there is no fraudulent intention. The Bill of Lading issued by the shipping company explicitly mentioned the final place of delivery as ICD GRFL Ludhiana. However, the shipping company filed the IGM at Mundra declaring Mundra as the final delivery port.

The Court noted that the petitioner requested amendment of the IGM to reflect the correct final delivery point, but the Customs authorities and the shipping company failed to act promptly, citing a circular that amendments could only be made at the behest of the shipping company. The Court observed that this stance was contrary to the statutory provision under Section 30(3) and that the Customs officers had a duty to amend the IGM upon satisfaction of the correctness of the request.

Internal communications of the shipping company confirmed that the final delivery was to be Ludhiana, further supporting the petitioner's claim. The failure to amend the IGM was found to be an error on the part of both the shipping company and Customs authorities, leading to wrongful detention of goods.

Issue 2: Filing of Manual Bill of Entry under Section 46 of the Customs Act for Perishable Goods

The petitioner sought permission to file a manual Bill of Entry at ICD Ludhiana for clearance of the perishable Kiwi fruit consignment. This was refused on the ground that the online system was linked to the IGM filed at Mundra. The petitioner invoked the Circular dated 04.05.2011, which permits manual filing in exceptional circumstances, especially for perishable goods.

The Court recognized the perishable nature and limited shelf life of the goods, emphasizing the urgency in clearance. It directed the Customs authorities to permit manual filing and movement of goods from Mundra to Ludhiana, overriding procedural hurdles. The Court found that refusal to allow manual filing was unreasonable and contrary to the intent of facilitating clearance of perishable goods.

Issue 3: Wrongful Detention, Delay, and Resulting Damage to Goods - Entitlement to Compensation and Refund

The petitioner's consignment of Kiwi fruit was detained for over three months due to delays in amendment of IGM, refusal to permit manual Bill of Entry, and disputes over the origin of goods. Despite Court orders, the shipping company shifted the goods to a location without rail connectivity, further delaying transit to Ludhiana. The petitioner submitted evidence that the goods had deteriorated and became unfit for human consumption due to these delays.

Joint inspection reports confirmed that 20-25% of the goods were damaged, and the petitioner provided disposal certificates confirming destruction of the entire consignment. The Court found the respondents' conduct amounted to wrongful detention and negligence, causing loss to the petitioner.

Reliance was placed on precedents establishing that seizure involves deprivation of possession and that detention without lawful cause entitles the owner to remedies including compensation. The Court referred to judgments holding the State liable for loss or damage to goods in its custody due to negligence or failure to act with due care.

Regarding refund of customs duty, the respondents argued Section 26A(3) prohibits refund in respect of perishable goods that have exceeded shelf life. However, the Court distinguished the present case, holding that the goods perished due to the respondents' failure to comply with Court orders and statutory duties. The Court held that denying refund in such circumstances would result in unjust enrichment of the State, contrary to principles of equity and justice.

Issue 4: Legal Principles Governing Seizure and State Liability

The Court examined the concept of seizure under the Customs Act and relevant case law, emphasizing that seizure entails deprivation of possession and control. The petitioner was effectively deprived of possession due to wrongful detention and failure of Customs authorities to release the goods despite Court directions.

Judgments cited clarified that the State, acting through its officers, owes a duty to preserve seized goods and is liable for loss or damage caused by negligence. The Court held that the petitioner was entitled to compensation for the loss suffered due to wrongful detention and mishandling of the consignment.

Issue 5: Interpretation of Section 26A of the Customs Act and Refund of Duty

Section 26A provides for refund of import duty where goods are defective, not conforming to specifications, or destroyed commercially valueless in presence of proper officer. The proviso in sub-section (3) excludes refund for perishable goods that have exceeded shelf life. The respondents relied on this to deny refund.

The Court held that this provision cannot be interpreted to deny refund where the goods perished due to the State's failure to act promptly and in accordance with law. The perishing of goods was not due to natural shelf life expiry but due to wrongful detention and delay caused by the respondents. Thus, the petitioner was entitled to refund of the customs duty paid.

Issue 6: Power of the Court to Award Compensation under Article 226

The Court invoked its power under Article 226 of the Constitution to award compensation for violation of fundamental rights and wrongful administrative action. It relied on authoritative Supreme Court judgments recognizing that monetary compensation is an effective remedy for established infringement of rights by State functionaries.

The Court noted the petitioner suffered not only pecuniary loss but also damage to business reputation and market standing. Considering the value of the consignment and the circumstances, the Court awarded compensation of Rs. 50 lakhs, directing recovery from the erring officers responsible for the delay and negligence.

The Court emphasized the need to curb red-tapism and ensure coordination among Customs, shipping companies, and testing labs to facilitate timely clearance of perishable imports, safeguarding public interest and importer rights.

Significant Holdings:

"The respondents had failed to perform their duties in accordance with the provisions of Customs Laws and cannot take shelter of the Circular dated 11.04.2017 when the Import documents including the Bill of Lading specifically mentioned the Final Place of Delivery as GRFL Ludhiana."

"The failure of the Customs Department and the Shipping Company to amend the Import General Manifest and permit filing of Bill of Entry at the appropriate point in time led to wrongful detention and damage of highly perishable goods, entitling the petitioner to refund of customs duty and compensation."

"Section 26A(3) of the Customs Act, which excludes refund for perishable goods exceeding shelf life, cannot be applied to deny refund where the goods perished due to wrongful delay and detention by the authorities."

"The State is liable to compensate the importer for loss caused by negligence and wrongful detention of imported goods, as the principle of unjust enrichment prohibits retention of customs duty when goods are destroyed due to fault of State functionaries."

"The Court exercises its jurisdiction under Article 226 to award monetary compensation for the infringement of fundamental rights caused by wrongful administrative action."

"The attitude of the Customs authorities and the shipping company in delaying clearance of perishable goods is an example of red-tapism which must be eradicated to protect the interests of importers and consumers."

Final determinations include direction to refund the customs duty paid on the Kiwi consignment along with interest at 6% per annum and payment of Rs. 50 lakhs as compensation to the petitioner for loss caused by delay and wrongful detention. The amount is to be recovered from the responsible officers. The respondents were also directed to comply with all Court orders for release and clearance of goods without further delay.